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The Basic Accounting Terms Everyone Should Know

Posted by Caroline Fallon on Sep 23, 2020 10:20:00 AM

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Accounting can be a tricky subject to tackle. When it comes to business accounting, regardless if you manage it or outsource it, it’s important to have a basic accounting understanding so you can be best prepared for your company. Once you understand the basic terminology you can better determine whether you need to outsource your accounting or if you can do it yourself.

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8 Basic Accounting Terms That Will Help You Better Understand Accounting

Having an understanding of these common terms used in basic accounting can help you to better grasp and manage your money:

1.      Business Accounting

The process of systematically recording, analyzing and interpreting the financial information of your company.

2.      Accruals

When you have a credit or debt that has yet to be fulfilled, that is an accrual.

3.      Assets

All of the tangible and intangible items that your company owns.

4.      Burn Rate

Your burn rate is a critical component that’s needed to calculate and manage a company’s cash flow. This is the rate at which your company spends money.

5.      Capital

Your capital is the amount of money you need to put down or invest in your company while it’s growing.

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6.      Cost of Goods Sold

The cost of producing your product or delivering your service. This is the first expense you’ll see on your profit and loss statement and very important when it comes to calculating the profit of your business.

7.      Depreciation

Over time, the value of your assets will start to decrease – it’s important to understand this for tax purposes, as larger assets can have an impact on your business.

8.      Equity

This is the amount of money or value of shares issued by a company.

9.      Profit

This is the difference between your income, cost of goods sold and expenses – the financial gains of your company.

Accounting can be a very difficult subject to navigate but understanding a few basic accounting terms can put you well on your way to bettering your company. Once you understand these terms, you can begin tackling your finances. However, if you need some help, contact Satty, Leving, and Ciacco, CPAs, P.C., they have all the knowledge and expertise you’ll need for business accounting.  

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Topics: Business Accounting

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